Cheap Life Insurance Explained

Copyright (c) 2010 Steve Wentworth

There are different types of term life insurance availbale to cater for different aspects of an individual or families protection needs. This article explains two of the most popular cheap term life insurance products.

Term life insurance
Term life insurance is the cheapest most basic form of life assurance available. It does not include an element of investment. The main feature being that if the life assured where to die within the term of the policy the insurer will payout the sum assured. If the policy is cancelled within the term then there is no cash value for the premiums already paid.

Decreasing term life insurance
The absolute cheapest version of term life insurance is decreasing or reducing term life insurance. Premiums for this type of insurance are lower due to the fact that the sum assured reduces to zero over the term period. An ideal protection for full repayment mortgage as each month the mortgage balance reduces. Should the life assured die at any point within the term then the sum assured will be sufficient enough to repay any mortgage debt and thus removing the burden on the remaining spouse and or family.

Advantages
Decreasing term insurance is much cheaper than level term insurance.
If you suffered loss of life this cover can provide a cash lump sum to your family or dependents. Providing a mortgage is on a full repayment basis this cash lump sum would be suitable to clear the remaining mortgage balance.
Can be used as family protection to cover say your dependents education to age eighteen or twenty one. Since the cover decreases, you may not need the same level of cover for a 13 year as you would for a 3 year old.

Disadvantages
If you are to survive beyond the term period then the policy has no maturity value. All premiums paid are lost. This is a protection only product no investment.
The sum assured decreases from month to month, however the premiums will remain the same, level term insurance may be better value for money.
The proceeds would only be paid out on death or earlier diagnosis of a terminal illness of the life assured. (Providing not taken with critical illness cover as well)

Level term life insurance
Level term life insurance offers a fixed sum assured throughout the term (the same amount for period of cover), the premium is obviously more expensive than decreasing / reducing term assurance, however the advantage is the benefit amount will remain constant. This type of policy is more suited to family protection (protecting your loved ones with a fixed cash amount on your death). But may also be suited to protect an interest-only mortgage or for business protection such as key man insurance, or shareholder protection.

Advantages
The sum assured remains the same throughout the term of the policy. In planning the right amount of cover during any point in time over the term, the sum assured will be paid in full on death of the life assured.
A more appropriate life cover to protect the family and dependents. However this is only a one of lump sum payment.

Disadvantages
If you are to survive beyond the term period then the policy has no maturity value. All premiums paid are lost. This is a protection only product no investment.
On death of the life assured the policy will only payout a one off payment of the sum assured, and does not provide a regular monthly payment equivalent to the life assured's income, as family income protection would.


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Steve Wentworth formed his firm Wentworth Financial Services in November 2007 having been in the industry since November 2002. Do you need a quote for the cheapest term life insurance we have life insurance starting at 16p per day. Read the original article in context at http://www.wentworthfs.co.uk/articles/term-life-insurance-009.aspx